Filtered by Subscriptions: Australia & New Zealand Economics Use setting Australia & New Zealand Economics
The further fall in the Westpac measure of consumer confidence in June to its lowest level since April 2016 will add to growing concerns about the outlook for consumer spending. On past form, confidence is now consistent with annual consumption growth …
14th June 2017
The share of the national income going to Australian households is at an eight-year low and is within a whisker of a 50-year low. What’s more, households in Australia currently get a smaller share of the income pie than households in most other advanced …
9th June 2017
The plunge in the international trade surplus to a six-month low of $0.6bn in April won’t last long as it was almost entirely due to the fall in coal exports caused by Cyclone Debbie, most of which has subsequently been reversed. As such, the trade …
8th June 2017
Contrary to what you may have heard, the rise in GDP in the first quarter does not mean that Australia now holds the record for the longest period in modern history without a recession. It’s true that Australia has gone without a recession for longer than …
7th June 2017
The small 0.3% q/q rise in GDP in the first quarter won’t worry the RBA too much as some of it was due to the temporary influence of the severe weather. Nonetheless, we believe that GDP growth will be weaker than the RBA expects both this year and next, …
Even though the economy may have contracted in the first quarter, the Reserve Bank of Australia left interest rates at 1.5% today and retained its optimistic view on the economic outlook. We suspect the RBA would be willing to look through a temporary …
6th June 2017
There is growing evidence that the household sector has begun to falter and, given the worryingly weak outlook for income growth, the situation is unlikely to turnaround any time soon. Indeed, we expect that consumption growth will slow from 2.7% last …
5th June 2017
Most of the recent gloomy headlines on Australia’s housing market are simply because people are mistaking the normal soft patch after the Easter school holidays for something more worrying. When you adjust for such seasonal swings, house prices actually …
2nd June 2017
The private capital expenditure survey for the first quarter showed that mining investment is becoming a smaller drag on GDP growth, while the leap in retail sales in April overstates the health of households. We estimate that GDP rose by just 0.2% q/q in …
1st June 2017
While there is growing evidence that consumption growth has begun to falter, this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates from 1.5% when it meets on Tuesday 6 th June. That said, we expect that slow economic …
30th May 2017
The latest evidence suggests that the Australian economy entered a soft patch in the first half of the year, with the quarterly rate of GDP growth perhaps averaging only 0.3%. As some of this weakness is due to the severe weather, growth will be stronger …
26th May 2017
The economy appears to be in a new phase where mining investment is no longer as big a drag on growth but net exports, consumption and dwellings investment are providing less support. The risk is that a fragile housing market results in consumption and …
25th May 2017
There is growing evidence that the household sector in Australia is beginning to struggle as subdued income growth weighs on spending. The sharp slowdown in the growth of retail sales volumes in the first quarter is consistent with a notable easing in …
24th May 2017
The further pick-up in our New Zealand Activity Proxy in March means it is now consistent with the 0.4% q/q increase in real GDP in the fourth quarter being followed by a much more respectable rise of at least 1.0% q/q in the first quarter. … New Zealand …
22nd May 2017
Wage growth in Australia has only been significantly lower than it is now during the Great Depression and immediately after World War II. While we do expect wage growth to rise from here, it won’t climb far above 2%. This will restrain income growth and …
19th May 2017
The labour market is not weak enough to prompt the RBA to cut interest rates again, but nor is it strong enough to trigger a large enough rise in wages and spending that would prompt the RBA to raise rates. We doubt that rates will rise until late 2019. … …
18th May 2017
Record low wage growth suggests that underlying inflation will stay below the RBA’s target range for another year or two yet and it goes some way to explaining why households aren’t particularly happy. … Wages (Q1) & Consumer Confidence …
17th May 2017
Australian Treasurer Scott Morrison made a big song and dance about new infrastructure spending in the Federal Budget. But while he shouldn’t be considered a public enemy as some new infrastructure spending is better than none, the package announced on …
12th May 2017
The Reserve Bank of New Zealand’s decision to leave interest rates at 1.75% today and signal that it doesn’t expect to raise rates until late 2019 supports our view that the financial markets have got ahead of themselves by pricing in rate hikes for early …
11th May 2017
Despite all the headlines suggesting that the Treasurer has embarked on an infrastructure spending spree, the fiscal figures appear to show that the economy is not going to be significantly stronger as a result. In fact, a small easing in the size of the …
9th May 2017
The latest retail sales data were much weaker than most had anticipated and will add to growing concerns about the health of the household sector. In particular, the sizeable slowdown in real retail sales growth in the first quarter suggests that real …
We’re not too keen on the plans of the Australian Treasurer to distinguish “good” debt from “bad” debt in the Federal Budget on Tuesday, but we do like the sound of a budget that is expected to allocate more funds to spending on infrastructure. That would …
5th May 2017
The upbeat tone of the Statement on Monetary Policy confirms that the Reserve Bank of Australia has become less worried about low inflation and that further interest rates cuts have become much less likely. But the RBA is not expecting inflation to rise …
The international trade surplus is well past its peak and will probably continue to fall in the coming months. What’s more, the nominal surplus in the first quarter won’t prevent net exports from subtracting from real GDP. We estimate that the 1.1% q/q …
4th May 2017
While the Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at its policy meeting on Thursday 11 th May, in light of the stronger-than-anticipated first-quarter inflation figures the RBNZ may adjust its OCR …
While employment growth strengthened in the first quarter and the unemployment rate dropped back below 5.0%, wage growth remained stubbornly low. We believe that wage growth will remained fairly muted for some time yet, which is one reason why we expect …
3rd May 2017
The Reserve Bank of Australia left interest rates on hold at 1.5% for the eighth meeting in a row today and we doubt it will be in a position to raise rates until at least 2019. There is still a risk that a further deterioration in the labour market …
2nd May 2017
The recent rises in underlying inflation suggest that the period of extremely low inflation in both Australia and New Zealand has come to an end. Underlying inflation, which excludes the temporary influence of the most volatile items, rose from 1.5% to …
1st May 2017
The rise in inflation in Australia in the first quarter was good news as it suggests the period of very low inflation is now over. But it is also bad news as it means prices are now rising faster than wages. And the resulting squeeze on real wages is …
28th April 2017
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at the meeting on Tuesday 2nd May and, in a change to our central forecast, we now no longer expect it to cut rates further this year. That said, interest rates are …
27th April 2017
Underlying inflation in Australia is by no means strong but, when coupled with the RBA’s financial stability concerns, it doesn’t appear to be weak enough to prompt the RBA to cut interest rates further. We no longer expect interest rates to fall from …
26th April 2017
Our New Zealand Activity Proxy (NZAP) indicates that the slowdown in GDP growth at the end of last year was temporary. In fact, February’s NZAP is consistent with a pick-up in GDP growth, from 0.4% q/q to around 1.0% q/q, in the first quarter. … New …
24th April 2017
The period of ultra-low inflation in New Zealand is well and truly over. While we still believe that the financial markets are too hawkish in expecting the official cash rate to start rising this year, the recent strengthening in underlying price …
21st April 2017
The further strengthening in underlying price pressures in the first quarter has increased the chances that the RBNZ will raise interest rates earlier than we had been expecting. Both we and the RBNZ had thought rates would not be raised until 2019. … New …
20th April 2017
We doubt that the surge in Australian employment in March will mark the beginning of a sustained rebound in employment growth. Indeed, a deeper dive into the latest employment trends in different sectors and states supports our view that jobs growth will …
13th April 2017
The huge leap in employment in March looks suspicious to us and we think the stagnation in the unemployment rate at a 14-month high of 5.9% is a better signal of the state of the labour market. That rate is close to the 6% plus mark that we think would …
The latest data suggest that we are right to be more downbeat than most on the outlook for Australia this year but more upbeat than most on the prospects for New Zealand. While both economies will benefit to some degree from the recent improvement in …
12th April 2017
The Westpac measure of consumer confidence nudged down only slightly in April, which is a welcome sight following the recent string of disappointingly weak data on household spending. That said, confidence is still at levels consistent with a modest …
The outright fall in retail sales values in February raises fresh concerns about the health of the retail sector. Admittedly, some of the recent weakness is due to temporary factors. But there are other factors holding back spending that are likely to …
7th April 2017
The Reserve Bank of Australia (RBA) was always going to leave interest rates at 1.5% today, but there are some subtle signs that the Bank is becoming more concerned about the outlook for the labour market and underlying inflation, but less concerned about …
4th April 2017
The rebound in the trade surplus is mainly due to the reversal of the distortion caused by Chinese New Year that suppressed the surplus in January. But with commodity prices having started to edge lower and the legacy of Cyclone Debbie currently reducing …
The outright fall in retail sales values in February adds to growing evidence that real consumption growth probably eased in the first quarter, while the latest news on the housing market has remained strong. … Retail Sales & Building Approvals …
3rd April 2017
The recent damage caused by Cyclone Debbie is clearly devastating for those households and businesses in Queensland that have been most affected. And it will leave a fairly large dent in Queensland’s economy, at least in the near-term. But it won’t …
31st March 2017
Today’s announcement that the Australian Prudential Regulation Authority has introduced tighter mortgage lending rules will go some way to addressing the RBA’s concerns about the overheating housing market and the associated risks to financial stability. …
Although the Reserve Bank of Australia’s meeting on Tuesday 4th April won’t be very exciting, as the RBA will leave interest rates at 1.5% for the sixth meeting in a row, events over the next month could make May’s meeting much more interesting. By then …
28th March 2017
Although Australian banks will probably soon be hit by more stringent mortgage lending rules, they can take some comfort from an interest rate environment that will probably be fairly favourable over the next couple of years for their net interest …
24th March 2017
The rebound in GDP growth in Australia in the fourth quarter and the easing in New Zealand appear to imply that the neighbouring nations are experiencing a change of fortunes. But we doubt this is a sign of things to come. While subdued domestic demand …
23rd March 2017
The Reserve Bank of New Zealand used today’s decision to leave interest rates at 1.75% to emphasise once again that rates won’t be raised either this year or next. The financial markets are slowly getting the message, but there is still plenty of scope …
22nd March 2017
The acceleration in house price inflation in the fourth quarter of last year has undoubtedly continued into the start of this year and will remain a thorn in the side of the Reserve Bank of Australia for a while yet. But the recent rises in mortgage rates …
21st March 2017
House prices in Australia are rising at their fastest pace since 2010 and the recent surge in auction clearance rates suggests that a further pick-up is on the cards. However, most other leading indicators point to an easing in house price inflation and …
17th March 2017
